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PayPal's recent amendments to its User Agreement regarding its ability to make robocalls to consumers drew the attention the Federal Communications Commission and federal lawmakers for potentially violating the Telephone Consumer Protection Act (TCPA).

In June, PayPal posted an updated User Agreement that included consent to receive autodialed and prerecorded calls and text messages from the company. Section 1.10, titled "Calls to You; Mobile Telephone Numbers," provided that PayPal could place such calls or texts to provide notifications about an account, troubleshoot problems, resolve a dispute, collect a debt, poll users' opinions through surveys and questionnaires, contact users with offers and promotions, or "as otherwise necessary" to service an account or enforce the User Agreement, PayPal's policies or any other customer agreement.

The policy applied not just to the phone numbers provided by users, but any telephone number "we have otherwise obtained," and allowed PayPal to share such phone numbers with affiliates and service providers, such as billing or collections companies. PayPal gave users until July 1 to agree to the new terms or forfeit use of the site.

PayPal's mailbox immediately filled up in response to the proposal, including a letter from the FCC. "If PayPal plans to make autodialed, prerecorded, or artificial voice calls or text messages to its customers, please be aware that federal law places strict limits on such communications," Travis LeBlanc, chief of the FCC's Enforcement Bureau, wrote.

"FCC requirements directly prohibit requiring a consumer to consent to receive autodialed or prerecorded telemarketing or advertising calls as a condition of purchasing any property, good, or service, and the company must give consumers notice of their right to refuse to give such consent," he wrote. PayPal's amended User Agreement does not give consumers notice of this right, LeBlanc said.

"If PayPal fails to include this required notice and/or fails to allow its users to refuse such consent, we are concerned that consent is in fact a condition of purchase of PayPal's service and thus violates the Telephone Consumer Protection Act and could subject PayPal, its affiliates, and its service providers to penalties of up to $16,000 per call or text message," the FCC warned.

The FCC letter also noted that the TCPA requires that the written agreement providing consent to receive such calls must identify the specific telephone number(s) for which the consumer is providing consent to be called or texted. "A blanket User Agreement that purports to apply to 'any telephone number that [consumers] have provided us or that we have otherwise obtained' does not meet the level of specificity required by law," LeBlanc wrote. "Consumers have the right to choose on which line(s) they wish to receive telemarketing or advertising calls, if they elect to receive such calls at all."

A few days later, Sens. Ed Markey (D-Mass.), Al Franken (D-Minn.), Ron Wyden (D-Ore.), and Robert Melendez (D-N.J.) followed up with a missive of their own. "We share the FCC's perspective and believe consumers should not have to agree to submit themselves to intrusive robocalls in order to use a company's service," the legislators wrote.

In response, PayPal announced that it would revise the policy to remove the offensive language. A June 29 blog post by Louise Pentland, PayPal's Senior Vice President and General Counsel, indicated that "We value our relationship with our customers and work hard to communicate clearly. Recently, however, we did not live up to our own standards." The post continued, "In sending our customers a notice about upcoming changes to our User Agreement we used language that did not clearly communicate how we intend to contact them. Unfortunately, this language caused confusion and concern with some of our customers."

Pentland noted that PayPal would modify the section at issue to make clear that PayPal will only use autodialed or prerecorded calls to help detect, investigate and protect customers from fraud, provide customers with notices about their account and to collect debts owed. Further, the post indicated that PayPal would not use autodialed or prerecorded calls or texts for marketing purposes without first obtaining the consumer's prior express written consent, that such consent is not required as a condition of using the company's products and services, and that a consumer's consent may be later revoked.

That same day, the FCC's LeBlanc issued a statement praising PayPal's commitment to improve its user agreement, "I commend PayPal for taking steps to honor consumer choices to be free from unwanted calls and texts. The changes to PayPal's user agreement recognize that its customers are not required to consent to unwanted robocalls or robotexts. It clarifies, rightly, that its customers must provide prior express written consent before the company can call or text them with marketing, and that these customers have a right to revoke their consent to receive robocalls or robotexts at any time."

LeBlanc's statement concluded, "These changes, along with PayPal's commitments to improve its disclosures and make it easier for consumers to express their calling preferences, are significant and welcome improvements."

Why it matters: In response to pressure from the FCC and several influential lawmakers, PayPal revised its User Agreement to clarify any confusion that may have arisen from proposed changes to the agreement regarding its ability to call and text its customers. This reaction brings the User Agreement into conformance with the FCC's TCPA regulations. While the company had not violated the TCPA or any other law, it nevertheless agreed to revise a policy that, if acted on, would have run afoul of the law.

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